Buying Property At An Auction

When banks seize homes, they remain vacant until someone else purchases the property. Buying property at auctions helps expedite the sale of these foreclosed homes, and provide buyers with housing options below market value.

The current state of the economy has created an excess of foreclosed properties. When the bank seizes these homes, they remain vacant until someone else purchases the property. Buying property at auctions helps expedite the sale of these foreclosed homes, and provide buyers with housing options below market value.

Purchasing a home at an auction is ideal because real estate is usually sold at a fraction of the original cost. However, there are many drawbacks, especially since many of the properties available have not had any occupants in months, and banks usually do not tend to the upkeep of foreclosed properties. Detailed information on the houses is minimal; buyers are sometimes only given an address. They do not receive information on the condition of the home, or details about the surrounding area. When a home is purchased under normal circumstances, the buyer has the opportunity to inspect the property, and check the integrity of the structure and the electrical and plumbing systems. If there are issues, the buyer can negotiate the price with the seller to offset the cost of making any improvements. Sometimes the seller will disclose these issues, and reduce the price of the home accordingly. 

Buying property at auctions usually means the home is sold as-is. This means that the new owner is not informed of the need for any possible repairs, the surrounding area, or taxes owed. The new owner is responsible for those expenses if they are needed. If they are not prepared for these costs, they may end up spending a lot more than originally intended. To avoid this issue, always check the the property, and any paperwork before attending the sale and making a bid. The properties for sale will be listed in the local newspaper a few weeks before they are actually up on the auction block. This gives potential buyers plenty of time to research, and determine the highest price they can afford to bid. This number should be based on factors such as the market value of the home, the purchase price of other homes in the area, and any tax liens or added expenses. 

Financing options for bargain sale purchases is also different than going through a traditional lender. Participation in the auction requires a large cash deposit, usually between $1,000 and $5,000. Once the bid has been placed and accepted, the new owner has a small window of time to provide the remaining balance of the final sale price. Cash and cashier's checks are the only form of payments accepted at an auction, so securing a direct loan from the bank is a good option for financing. 

Buyer education is the most important thing to remember about buying a home at an auction. The amount you bid is not the only amount you should consider when buying property at auction prices. Doing a little research is helpful in calculating a price ceiling to factor in expenses such as repairs, tax liens, and insurance. Although cash purchases only are accepted, financing options are available in the form of cash loans. 

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